What kind of taxes contributes most to decreasing inequality in the distribution of income?
Progressive income taxes.
The difference between what consumers are willing to pay for units of a good and the price consumers actually pay for units of the good is called?
Consumer surplus
What is true of the substitution effect of an increase in the price of a normal good?
It works to reinforce the income effect.
To maximize utility, a consumer with a fixed budget will purchase quantities of goods so that the ratios of the marginal utility of each food to its
price are equal
Assume that the price elasticity of demand for good X is constant and equal to -0.5 and the price elasticity of demand for good Y is constant and equal to -2. Assume that goods X and Y have identical upward-sloping elastic supply curves. If a per-unit exc
The tax share paid by consumers of good X would be relatively higher than that paid by consumers of good Y.
A monopolist produces two unrelated foods, X and Y. The demand for X is currently price elastic and the demand or Y is currently price inelastic. To increase its total revenue, the firm should change the price of X and Y in which of the following ways?
Price of X: Decrease
Price of Y: Increase
Assume that the demand for a certain good is prefectly inelastic and the supply curve of the good upward sloping. Which of the following occurs in the market for the good if the price of an input used to produce the food increases?
A decrease in the supply and an increase in the equilibrium price.
Which of the following will most likely lead to a more equal distribution of income?
More progressive income taxes
If the income elasticity of demand for a good X is negative and the cross-price elasticity of demand between good X and good Y is negative, what must be true for good X?
X is an inferior good and is a complement to Y
According to the law of diminishing marginal utility, what's true?
The additional satisfaction received from consuming extra units of a good decreases as consumption of the good increases.
If a severe drought destroys a significant portion of the peanut crop and peanut farmers' revenues increase, which of the following is true over the observed range of prices?
The demand for peanuts must be price inelastic
Suppose that the market supply curve for shoes is upward sloping and the market demand curve is downward sloping. How will the imposition of a sales tax on shoes affect the consumer surplus, and the total surplus?
Consumer surplus: Decrease
Producer surplus: Decrease
Total surplus: Decrease
In a given time period, a person consumes more and more of a good or service and, ad a result, enjoys each additional unit less and is willing to pay less for each additional unit. This behavior is consistent with the law of
Diminishing marginal utility
At her current level of consumption, a consumer is willing to pay up to $1.50 for a bottle of water nad up to $1,500 for a diamond ring because the
Marginal utility of a bottle of water is less than the marginal utility of a diamond ring.
If the government imposes a tariff on imports of cheese, the price and quantity of imported cheese will most likely change in which of the following ways?
Price: Increase
Quantity: Decrease
Jane spends all her weekly allowance to buy only 2 goods: soda and apples. According to the table above, if her preferences are characterized by the law of diminishing marginal utility, then which of the following statements is correct?
Jane can buy more apples and less soda to maximize her utility.
An increase in the effective minimum wage will have less of an impact on employment in the demand for labor is
Relatively inelastic
The cross-price elasticity of demand between good X and good Z measures the percentage change in the quantity demanded of good X in response to a percentage change in
The price of good Z
The additional satisfaction received from consuming an additional unit of a good is called
Marginal utility
If the market demand for a good is inelastic and the supply is elastic, what is true when there's an increase in sales tax?
Consumers will bear most of the burden of the tax.
Assume that demand for bottled water is relatively price elastic. An increase in supply of bottled water will result in what?
A decrease in price, leading to an increase in total revenue.
When total utility is at its maximum, marginal utility?
Equals 0.
What tends to make the demand for a product more elastic?
New firms which produce similar products enter the industry.